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Table of Contents CHAPTERS Chapter 1 The Foundation of Ethical Thought Chapter 2 Contemporary Issues in Business Ethics Chapter 3 Stakeholders and Corporate Social Responsibility Chapter 4 Corporate Governance and Corporate Compliance Chapter 5 Ethics and the Environment Chapter 6 Health Care Ethics Chapter 7 Ethics and Information Technology Chapter 8 Strategic Planning and Corporate Culture Chapter 9 Ethics and Financial Reporting Chapter 10 Establishing a Code of Ethics and Ethical Guidelines Chapter 11 Evaluating Corporate Ethics CASES Case 1: Adelphia: What¿s Wrong With This Picture? Case 2: Ahold: Is That The Dutch Translation of Enron? Case 3: Blue Bayou Case 4: Boeing: How Low Can They Fly? Case 5: Bre-X: All That Glitters Isn¿t Gold Case 6: Conrad Black and Hollinger International: All the News That¿s Fit to Sell Case 7: Enron: Were They The Crookedest Guys in the Room? Case 8: Google: Don¿t Do Evil Unless¿ Case 9: HealthSouth: The Rise and Fall of the Scrushy Empire Case 10: Herman Miller: Eddie Get Off That Chair Case 11: Interface: More Than Just a Carpet Company Case 12: Livedoor: Ethical Issues in Japan Case 13: Lucent Technologies: What Does FCPA Mean Again? Case 14: Martha Stewart and ImClone: What Color Goes with Prison Gray? Case 15: McWane: A Dangerous Business Case 16: Merck¿s Vioxx: How Would You Interpret the Data? Case 17: Music Industry: Ethical Issues In a Digital Age Case 18: Parmalat: Can You Sue Over Spilled Milk? Case 19: Perfect Payday: How Apple Computer And Others Have Learned to Love Stock Options Case 20: Tyco: I¿m Sure That It¿s A Really Nice Shower Curtain Case 21: Volkswagen: Herbie Takes Investors for a Ride Case 22: Wal-Mart: But We Do Give Them A 10% Employee Discount Case 23: WorldCom: Can You Hear The Lawsuits Now? Preface As the first decade of the new millennium quickly comes to an end, businesses around the world continue to address the ethical behavior of their employees. Whether you consider Charles Ponzi of the 1920¿s or Kenneth Lay of the 1990¿s, unethical behavior is as old as commerce itself. Greed is part of human nature and as long as there are finite amounts of goods of value, some people will continue to try to obtain those items by whatever means possible. As the character in the movie Wall Street, trader Gordon Gekko portrayed by Michael Douglas, highlights in his ¿Greed is Good¿ speech, there is a fine line between using self interests to motivate versus using those same interests to obtain riches through unethical and greedy actions. Our Philosophy: The philosophy of this textbook is to serve as an integration tool in the classroom to highlight the positive consequences of ethical behavior and the negative consequences of unethical behavior. The primary focus of the chapters is to present potential ethical dilemmas that decision makers may face pertaining to a number of different decision making areas. Of the twenty-three cases in the textbook, twenty-one of the cases highlight the negative consequences to the company¿s stakeholders when managers pursue unethical decisions making. Our challenge was to write a textbook that covers the necessary issues relating to business ethics so that students will be better prepared for the ethical dilemmas they will face in their chosen careers. We have found through our experiences in the classroom over the past fifteen years that students need to be exposed to ethical situations. We agree with the AACSB¿s position that even though several business schools have adopted innovative strategies for teaching students about ethics, more business professors are assuming a questionable idea ¿ that students are being adequately prepared to face the ethical dilemmas of the twenty-first century. We believe that business students prefer a real world approach. Today¿s business students like to discuss companies they are familiar with and those companies whose products and services create a familiar surrounding for them in their daily lives. Our goal was to develop a textbook using real world scenarios and situations in examples and cases that provide students with a basic understanding of the issues surrounding business ethics and that provides them with a belief that ethics really matter. Our textbook presents a broad and comprehensive perspective of ethics which includes chapters on information technology, financial management, and strategy. In addition, we also present information related to the AACSB¿s recommended topics of the responsibility of business in society, ethical decision making, ethical leadership, and corporate governance. One of the benefits of this textbook is the flexibility it gives the instructor on how he/she can present the material. This textbook can be used at both the undergraduate and graduate levels. We believe that case discussions will differ significantly at both levels. At the undergraduate level, we expect that students will focus on the most concrete ideas in the cases. However, at the graduate level, we expect that students will evaluate the cases by integrating their own experiences into the discussions, as well as the more subtle aspects of the chapters and cases. The cases in the text are designed to stimulate class discussion on a variety of ethical issues. Our goal was to write a textbook that differentiates itself from other ethics textbooks on four dimensions. These dimensions include: (1) Global Perspective; (2) Real World Business Ethics Cases; (3) Comprehensive and Diverse Selection of Ethics Topics; and (4) Central Theme Linking Each Chapter. Each of these dimensions is expanded below. Key Dimension #1: Global Perspective As we highlight through the seven global ethics cases, ethical issues in business are both global and domestic in nature. Our textbook integrates a global focus within each of the 11 chapters in the textbook. This allows the student to see the global impact of ethical decisions and it allows the instructor the freedom to integrate ethical topics from a global perspective. Key Dimension #2: Real World Business Ethics Cases The cases highlight a number of different ethical issues, including, but not limited to, potentially defective products, inaccurate financial statements, illegal investor trading, and top management misconduct. The majority of the cases included in our textbook are current and ongoing. This gives the instructor and the students the ability to update the cases and see how the cases are progressing. The number of cases included in our textbook is superior to other textbooks. We believe that professors need an adequate number of cases to make the course interesting and to eliminate the need to supplement the cases presented in textbooks. The quantity of cases presented allows instructors flexibility in adapting to various time formats for the class. Our approach in writing this textbook is a practical/applied approach. We believe that students want real world connections when studying in today¿s business environment. Business students are more connected to the current issues than the students of twenty, or even ten, years ago. They have access to immediate information and are computer literate. Given this, our textbook focuses on real world examples and avoids scenarios that are fictional. Key Dimension #3: Comprehensive and Diverse Selection of Ethics Topics (Better Coverage and Content) With eleven chapters and twenty three cases, we believe this is one of the most comprehensive business ethics textbooks in the marketplace. In addition to having a comprehensive nature for the ethical issues presented in the cases, our textbook has chapters on financial reporting, information technology, and strategy that are not included in many of the other business ethics textbooks. Furthermore, we have comprehensive topic areas within each chapter that have been developed based on real business scenarios. This allows for a more focused, yet, still comprehensive, presentation of the material in the chapters. Key Dimension #4: Central Theme Linking Each Chapter We believe that it is necessary to have a central theme that is recurrent throughout each chapter. When reading textbooks, it is easy for students to view each chapter as unrelated to the next. Therefore, our goal was to link each chapter with one common theme which focused primarily on the interaction of the firm with its various stakeholders. We stressed in each chapter that facing ethical dilemmas is a challenge and that there are consequences attached to each decision that is made in the business world. Our purpose is to present ethical challenges that students will face and help them see the consequences of their decisions. The challenges are discussed in the chapter material and the consequences of actions/decisions are emphasized in the cases. Structure of the Chapters We believe that the eleven chapters in the textbook cover, in a comprehensive nature, the most relevant topic areas as related to ethics. A major topic of each of the chapters is introduced in the beginning of the chapter with a real ethical scenario. These scenarios are a good starting point in any lecture pertaining to that particular chapter. In addition, there are thought provoking questions at the end of each chapter to also allow the instructor to facilitate the discussion component within the classroom. Chapter 1 introduces the student to the theoretical background of ethics. By drawing on the teachings and beliefs of ancient philosophers, Chapter 1 provides business students with a strong theoretical support from a philosophical perspective. Chapter 1 also provides the overall framework of the textbook based on the model developed by the authors. Chapter 2 addresses contemporary issues that relate to ethical decision making. Chapter 2 includes a history of the study of ethics and discusses how integrity plays a role in ethical decision making. Chapter 2 also highlights that managers have the ability to control the decision making process by considering the ethical implications of their decisions. In one of the cornerstone chapters, Chapter 3 presents the relationship between businesses and their stakeholders. Stakeholder theory is one of the integrating tools used to link the different chapters by identifying management¿s responsibility to others when a firm makes a decision. In addition, Chapter 3 highlights that the firm¿s own responsibility is to be socially responsible and aware of its social commitment to others. Chapter 4 addresses the critical issues of corporate governance and corporate compliance. For those firms that are publicly traded, the managers have a responsibility to maximize the interests of their stockholders and other stakeholders through representatives such as the Board of Directors. In addition, Chapter 4 addresses the controversial issue of CEO compensation. Furthermore, Chapter 4 presents the United States government¿s response to a lack of effective corporate governance via the passing of the Sarbanes-Oxley Act in 2002. The Chapter also presents how other countries have adjusted their legislation in order to address corporate governance issues. Chapter 4 also highlights the continuous challenge of firms as they compete globally by presenting rankings of corruption around the world. Chapter 5 addresses ethical issues relating to the firm¿s interaction with the natural environment. This Chapter presents a topic that is missing from many other ethics textbooks. Chapter 5 addresses how firms need to address the different demands of various stakeholders related to the environment. In addition, Chapter 5 also presents how firms can use the natural environment as an opportunity to enhance their competitive advantage. Furthermore the Chapter also addresses current topics such as environmental sustainability and climate change. Chapter 6 address issues related to health care. Again this topic area is not covered in other textbooks but health care costs are rising faster than inflation in countries all around the world. Chapter 6 addresses issues such as the role of medical and biomedical ethics, the relationship between the doctor and the patient, the ordering drugs online and the role of stakeholders in the relationship between firms and health care issues. Chapter 7 also addresses a topic not discussed in many other ethics textbooks which is the ethical issues related to information technology. As today¿s students become more technology savvy, they need to understand that new ethical issues are created with every technological advancement. Topics covered in Chapter 7 include privacy issues related to various stakeholders, the role of government regulations and the control of personal information. Chapter 8 addresses the ethical issues related to strategic planning and corporate culture. Chapter 8 highlights the impact trust and power can have on how ethical and unethical decisions are made by management. Chapter 8 also addresses how decisions are made during an ethical crisis and disaster. Chapter 8 presents the argument that ethical leadership links the ethical issues related to strategic planning and corporate culture. Chapter 9 is devoted to the ethical issues related to financial reporting. Chapter 9 presents what is expected by management in the development and presentation of the financial statements as well as the role of the external auditors who are responsible for verifying the accuracy of the financial statements. Chapter 9 also presents some common ways in which management can manipulate the financial statements in order to present desired but inaccurate financial data. Chapter 10 examines the role of a code of ethics and the establishment of ethical guidelines to assist decision makers in making the correct ethical decisions. Chapter 10 examines the benefits of a firm having a strong code of ethics and also presents what content areas should be considered within a code of ethics. Chapter 10 also presents some global ideas which firms could integrate within their own ethics philosophy. Chapter 11 concludes the chapters in the textbook by examining how firms can evaluate their ethical commitment. Chapter 11 highlights the importance of a strong ethical commitment by presenting data pertaining to cases of fraud that occur globally. Chapter 11 also addresses the issue of the establishment of a comprehensive ethical training program to ensure that employees understand their responsibilities. Chapter 11 addresses the importance of having a Corporate Ethics Officer who is ultimately accountable to the ethical conduct of the employees. Also addressed is the issue of firms allowing employees to be whistleblowers when they suspect unethical activities are occurring within the firm. Structure of the Cases The cases were selected based on their relevance, timeliness and the presentation of a broad range of ethical issues globally. Seven of the 23 cases are located outside the United States. The locations of these cases are the Netherlands (Ahold), Canada (Bre-X and Conrad Black), Japan (Livedoor), Saudi Arabia (Lucent Technologies), Italy (Parmalat) and Germany (Volkswagen). In addition, the companies in the cases represent a number of diverse industries including: telecommunications, food and food distribution, financial services, aerospace and defense, mining, media, energy, health care, durable goods, pharmaceuticals, music, automobiles and retailing. Furthermore, the cases highlight a number of ethical issues including financial and wire fraud, bribery, lack of corporate governance, manipulation of data, perjury, Ponzi schemes, obstruction of justice, lying to government officials, violations of government regulations and the death and mutilation of employees. The authors believe that this textbook represents a comprehensive review of current ethical issues from a global perspective. The 11 chapters and 23 cases will allow any instructor the ability to fully integrate current ethical issues in the classroom in an effective manner. Using Understanding Business Ethics in the classroom will enlighten students to the complex ethical issues they will face in the business world. Instructor¿s Supplements A printed Instructor¿s Manual with Test Item File (ISBN: 0-13-173543-8) accompanies this text. The IM with Test Item File includes chapter guides for each chapter in the text. The chapter guides include a chapter outline and lecture notes. The Test Item File contains approximately ?? questions per chapter including multiple choice, true/false, short-answer, and scenario-based questions. Suggested answers, difficulty ratings, and page references are included for all questions. Classroom-tested and author-approved, this supplement offers instructors everything they¿ll need to help prepare their lecture. The Instructor¿s manual with Test Item File can also be found at www.prenhall.com/irc. Registration is simple and gives you immediate access to new titles and new editions. As a registered faculty member, you can download resource files and receive immediate access and instructions for installing course management content on your campus server. If you never need assistance, our dedicated technical support team is ready to help with the medial supplements that accompany this text. Visit www.247.prenhall.com for answers to frequently asked questions and toll-free user support phone numbers. Coursesmart eTextbooks Online CourseSmart Textbooks Online is an exciting new choice for students looking to save money. As an alternative to purchasing the print textbook, students can subscribe to the same content online and save up to 50% off the suggested list price of the print text. With a CourseSmart eTextbook, students can search the text, make notes online, print out reading assignments that incorporate lecture notes, and bookmark important passages for later review. For more information, or to subscribe to the CourseSmart eTextbook, visit www.coursesmart.com. We would like to thank the following reviewers: Carolyn Ashe, University of Houston, Downtown Jeff Bauer, University of Cincinnati, Clermont Cam Caldwell, University of Houston, Victoria Virginia Gerde, Duquesne University Marilyn Kaplan, University of Texas, Dallas Michael McLane, University of Texas, San Antonio Kamal D. Parhizgar, Texas A&M University Gayle Porter, Rutgers University Diane Swanson, Kansas State University Dedication: To Casey and Olive, Sarah, and Olivia and John: Who have given me invaluable ethical guidance in my role as son, husband and father. PAS To Peter, Olivia and John ¿ the three most important reasons for staying on an ethical track And To my family, especially my mother, and special friends, those who are here and those no longer with me, who have provided inspiration and taught me through example that ethics really do matter. SDS About the Authors Dr. Peter Stanwick was born and raised in Toronto, Canada. He received his Bachelor of Arts degree in Commercial and Administrative Studies from the University of Western Ontario. He received his Master of Business Administration degree from the University of Washington and received his Doctor of Philosophy in Strategic Management from Florida State University. He is an Associate Professor of Management at Auburn University and currently teaches classes in Strategic Management, Ethics, Corporate Governance, Environmental Management and International Management. Dr. Stanwick likes to travel, play golf and listen to his extensive vinyl record collection. Dr. Stanwick also has a weekly show called 80¿s Rewind on Auburn University¿s campus radio station, WEGL. He is married and has two children. Dr. Sarah Stanwick was born in Greensboro, North Carolina. She was raised in Greensboro, North Carolina and in Jacksonville, Florida. She received her Bachelor of Science degree in Accounting from the University of North Carolina at Greensboro. She received her Master of Accountancy degree from the University of North Carolina at Chapel Hill and her Doctor of Philosophy degree in Accounting from Florida State University. Dr. Stanwick is a Certified Public Accountant. She is an Associate Professor of Accounting at Auburn University. Currently, she teaches classes in cost accounting, intermediate accounting and ethics. Dr. Stanwick enjoys traveling with her family and making crafts of all kinds. Residing in Auburn, Alabama, she is married and has two children.
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